alt-a the forgotten segment of the mortgage market.pdfVIP

Alt-A: The Forgotten Segment of the Mortgage Market Rajdeep Sengupta This study presents a brief overview of the Alt-A mortgage market with the goal of outlining broad trends in the different borrower and mortgage characteristics of Alt-A market originations between 2000 and 2006. The paper also documents the default patterns of Alt-A mortgages in terms of the various borrower and mortgage characteristics over this period. (JEL G1, G21) Federal Reserve Bank of St. Louis Review, January/February 2010, 92(1), pp. 55-71. igh default rates on subprime mort- retained by banks in their portfolios until they gages marked the onset of the current matured or were paid off. Securitization is a financial crisis. Not surprisingly, both process by which mortgages (typically a large pool H academic research and policy studies of mortgages) are used as collateral to issue secu- have focused their attention on the boom and sub- rities, also known as mortgage-backed securities sequent collapse of the subprime mortgage market. (MBS). Some mortgage securities are backed However, the high incidence of defaults was not implicitly or explicitly by the U.S. government limited to subprime mortgages only; defaults have and are commonly called agency MBS. Such origi- also risen rapidly in the other segments of the nation of mortgages and issuance of MBS is domi- mortgage market—for example, the market for nated by loans to prime borrowers con